We’re not in the business of predicting the stock market, but it is interesting how sharp the recovery has been so far. We’ve noted that some observers think there is a political element to some recent moves in the market.
It is worth pondering just how important the political element is. Note the long, sad decline in the 1930’s. The cause was in part political. As we have said many times, the reason that the Recession of 1929 became the Great Depression was because the government took no action to stem the cascade of bank failures in 1930. The US faced a similar situation in late 2008 following the Fed’s and Treasury’s near-catastrophic decision to let Lehman Brothers fail. Though the mess from that has been significantly cleaned up (at great cost), no one knows at this point just what economic mischief the Obama administration is yet capable of making and what the chart above will look like in another two years. (HT: TBP)